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Collateral For Letter Of Credit for United Arab Emirates

Collateral For Letter Of Credit Template for United Arab Emirates

A Collateral for Letter of Credit agreement under UAE law is a security document that establishes and governs the provision of collateral to secure obligations under a Letter of Credit facility. The document complies with UAE Federal Law No. 18 of 1993 (Commercial Code) and relevant Central Bank regulations, incorporating necessary provisions for creating and perfecting security interests in the UAE. It details the nature of the collateral, maintenance requirements, enforcement mechanisms, and the rights and obligations of all parties involved in the security arrangement. The agreement typically includes specific provisions addressing UAE regulatory requirements and local banking practices.

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What is a Collateral For Letter Of Credit?

The Collateral For Letter of Credit agreement is a crucial document in UAE trade finance, used when a party needs to provide security for Letter of Credit obligations. This document becomes necessary when banks require collateral support for issuing Letters of Credit, particularly in international trade transactions. The agreement must comply with UAE Federal Laws, including the Commercial Code and Central Bank regulations, and often incorporates international banking practices (UCP 600). It's commonly used in the UAE's major trading hubs like Dubai and Abu Dhabi, where businesses frequently engage in cross-border trade requiring secured Letter of Credit facilities. The document specifies the type and value of collateral, whether cash, securities, or other assets, and includes detailed provisions for maintaining and enforcing the security interest under UAE law.

What sections should be included in a Collateral For Letter Of Credit?

1. Parties: Identification of the Security Provider/Collateral Provider, the Bank, and any other relevant parties

2. Background: Context of the security arrangement, reference to the underlying Letter of Credit facility

3. Definitions and Interpretation: Key terms used in the agreement, including banking terms, security-related definitions, and interpretation rules

4. Creation of Security Interest: Legal provisions establishing the security interest over the collateral

5. Secured Obligations: Definition of obligations secured, including the Letter of Credit and related charges

6. Representations and Warranties: Statements by the Security Provider regarding ownership, authority, and status of the collateral

7. Covenants: Ongoing obligations of the Security Provider regarding maintenance and preservation of collateral

8. Perfection Requirements: Steps required to perfect the security interest under UAE law

9. Enforcement: Rights and procedures for enforcing the security upon default

10. Power of Attorney: Appointment of the Bank as attorney for security-related actions

11. Notices: Communication procedures between parties

12. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction details

What sections are optional to include in a Collateral For Letter Of Credit?

1. Further Assurance: Additional security measures that may be required - include when dealing with complex collateral structures

2. Currency Provisions: Include when Letter of Credit involves foreign currency

3. Insurance: Include when collateral requires insurance coverage

4. Custody Arrangements: Include when collateral requires third-party custodian

5. Release and Discharge: Include specific release provisions when dealing with revolving Letters of Credit

6. Islamic Banking Provisions: Include when the Letter of Credit is Shariah-compliant

7. Multiple Security Providers: Include when collateral is provided by multiple parties

What schedules should be included in a Collateral For Letter Of Credit?

1. Schedule 1 - Collateral Description: Detailed description of all assets provided as collateral

2. Schedule 2 - Letter of Credit Details: Specifics of the Letter(s) of Credit being secured

3. Schedule 3 - Perfection Requirements: Specific filing and registration requirements under UAE law

4. Schedule 4 - Form of Notice: Standard forms for various notices required under the agreement

5. Appendix A - Security Provider's Corporate Documents: Relevant corporate authorizations and documents

6. Appendix B - Registration Forms: Forms required for security interest registration with relevant authorities

7. Appendix C - Valuation Methodology: Agreed methods for valuing different types of collateral

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Publisher

Ƶ

Document Type

Letter of Credit

Sector

Banking

Cost

Free to use
Relevant legal definitions








































Clauses































Relevant Industries

Banking and Financial Services

International Trade

Import/Export

Manufacturing

Retail

Wholesale

Commodities Trading

Construction

Energy and Resources

Logistics and Supply Chain

Relevant Teams

Legal

Finance

Treasury

Trade Finance

Credit Risk

Compliance

Banking Operations

Corporate Banking

Documentation

Risk Management

Relevant Roles

Trade Finance Manager

Credit Risk Officer

Corporate Banking Manager

Treasury Manager

Chief Financial Officer

Finance Director

Legal Counsel

Compliance Officer

Banking Operations Manager

Security Documentation Officer

Trade Operations Manager

Relationship Manager

Credit Administrator

Risk Management Director

Company Secretary

Industries






Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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